Invest Like A Farmer is the Wall Street market blog by T. H. RAPKO AND COMPANY, LLC’s managing member Thomas H. Rapko. It presents Tom’s insights and thoughts on the markets. Although the author expresses a view on the likely future performance of certain investment instruments, each individual should carefully consider his or her investment position in relation to his or her own circumstances and with the benefit of professional advice prior to making any investment decisions.

Sunday, October 18, 2015

Ratchet Up the Cash Flow

One of my favorite investing books of all time is Rich Dad Poor Dad which if you've had an opportunity to read outlines the basic principle of defining what an asset is, and recommending ONLY purchasing assets. Simply put, Kiyosaki defines an asset as something that pays YOU to own IT. I think that is an accurate description.

And although some may disagree, the stock market is probably one of the greatest inventions ever because it allows investors at almost every level of the economic spectrum to buy assets in the form of ownership interest(s) in companies that pay dividends.

By Kiyosaki's definition, however, many, many stocks do not qualify as assets because they pay no dividend. As financial farmers, we like dividends. It is one of the tenets of our philosophy.

So with that said, 2015 has proven to be an excellent year to literally stock up on dividend paying stocks which saw their valuations get crushed in August only to rally back through October; little mention has been made of the increasing number of companies RAISING their dividends while also buying back shares and cutting costs as well.

Pure growth investors heap piles of…scorn…on those who invest in dividend paying, cost-conscious, shareholder friendly companies, but the long-term benefits are obvious; a steadily rising left to right stock price.

The opportunity of a lifetime comes across my desk about once a month, and ratcheting up cash flow has consistently been one that stops by to say "hello." Boring, enduring brands with monopolistic presence, pricing, and products are tough to beat over rolling 10-year periods. Take a look as some of the most boring businesses in the S&P 500 YTD…very juicy cash flow indeed.